An individual who is resident in India and is an author of a book is eligible for tax deduction under section 80QQB of the Income Tax Act, 1961. To get eligible, royalty income should have been incurred from a book should be a work of literary, artistic or scientific nature. This means, author of other types of books which are not literary, artistic or scientific nature are not allowed as a tax deduction U/S 80QQB.
Joint author is also eligible for tax deduction under section 80QQB.
Tax deduction is allowed only when income is derived by the author either;
- on account of any lump sum consideration for the assignment or grant of any of his interest in the copyright of such books, or
- of royalties or copyright fees
Lumpsum in regard to royalties or copyright fees includes advance payment on account of such royalties and copyright fees which is not returnable.
Maximum limit of tax deduction U/S 80QQB
Under Section 80QQB, least of the following two is eligible for tax deduction;
- 100% of such income, or
- Rs 3,00,000
If the author has not received royalty or copyright fees in a lumpsum, then the amount in excess of 15% of the value of such books sold during the previous year shall be ignored. This means, royalty should be restricted up to 15% of the value of such books.
A certificate in form 10CCD should be collected from the payer to claim tax deduction u/s 80QQB.
Additional conditions when royalty earned outside india
In case royalty or copyright fees earned outside India, then to get eligible for tax deduction under section 80QQB, you need to fulfill the following two conditions;
- It should be remitted within 6 months from the end of the relevant previous year or within such time as extended by RBI.
- A certificate in form 10H from RBI or other authorized authority shall be submitted along with return of income.
Books for the purpose of section 80QQB does not include brochures, commentaries, diaries, guides, journals, magazines, newspapers, pamphlets, textbooks for schools, tracts or other publications of similar nature.
If the author has claimed tax deduction under section 80QQB, then no deduction shall be allowed under any other provisions of the act in respect of such income.
Example 1
Mr X has produced following details for the year:
- Lumpsum royalty on books received covered u/s 80QQB – Rs 10,00,000
- Expenditure incurred = Rs 3,10,000
Computation of deduction
- Net royalty qualifying for tax deduction under section 80QQB = Rs 10,00,000 – Rs 3,10,000 = Rs 6,90,000
- Amount deductible U/s 80QQB = least of Rs 3,00,000 or amount of net royalty = least of Rs 3,00,000 or Rs 6,90,000 =Rs 3,00,000
Example 2
Mr X has produced following details for the year:
- Lumpsum royalty on books received covered u/s 80QQB – Rs 10,00,000
- Expenditure incurred = Rs 3,10,000
- Amount remitted from abroad within 6 months from the end of the financial year = Rs 7,00,000
Computation of deduction under section 80QQB
- Net royalty eligible for tax deduction u/s 80QQB = Rs 7,00,000
- Eligible expenditure to be deducted from royalty = (Rs 7,00,000/Rs 10,00,000) * Rs 3,10,000 = Rs 2,17,000
- Net royalty qualifying for deduction = Rs 7,00,000 – Rs 2,17,000 = Rs 4,83,000
- Amount of deduction under section 80QQB is least of Rs 3,00, 000 or Rs 4,83,000 = Rs 3,00,000
Example 3
Details of the assessee assuming royalty not received in lump sum:
- Royalty on books received from abroad – Rs 6,20,000
- Amount remitted within 6 months from the end of relevant previous year – Rs 3,60,000
- Rate of royalty as % of value of books – 18%
- Expenditure for earning royalty – Rs 1,20,000
Computation of deduction under section 80QQB
- Royalty on books covered by section 80QQB – Rs 6,20,000
- Amount eligible for deduction under section 80QQB – Rs 3,60,000
- Royalty exceeding 15% = Rs 3,60,000 * (3%/18%) = Rs 60,000
- Expenditure eligible = (amount of royalty eligible * expenditure incurred) / amount of royalty received = (Rs 3,60,000 * Rs 1,20,000) / Rs 6,20,000 = Rs 60,678
- Net amount qualifying for deduction = Rs 3,60,000 – Rs 60,000 – Rs 60,678 = Rs 2,39,322
- Amount of deduction under section 80QQB is least of Rs 3,00, 000 or Rs 2,39,322 = Rs 2,39,322.
